As Global Food Prices Soaring, Rice Could be Next in Line

Food prices have been on the rise in the past few months, and export bans have followed. As we already wrote many times, the Russo-Ukrainian conflict has driven up wheat prices. Since then, only bad news are coming: on top of wheat crop scarcity in Ukraine and government order blocking wheat exports from Russia, the latter locked seaborne grain shipments to the West.

As a result, wheat prices have soared more than 50% on an annual basis. Food export bans or serious disruptions have included those from India (wheat), Ukraine (wheat, oats and sugar, among others) and Indonesia (palm oil).

Now, reportedly, Thailand and Vietnam have been in talks on a deal to increase the price of their rice exports, so if they fail to reach common ground, rice price surge could be next in line. The United Nations' Food and Agriculture Organization Food Price Index already shows international rice prices getting hotter by week for the fifth consecutive month to reach a 12-month high. According to Bloomberg, global consumption of rice has increased every year since 2006. Feed and fertilizer costs for farming are also rising – not least because of soaring inputs (e.g. natural gas, heavily used in ammonia and carbamide production) and energy prices which are adding to freight costs.

Nevertheless, so far the situation with rice crops and stocks in the U.S. remains relatively calm. According to the latest USDA report, old crop rice was up 1 million hundredweight from May at 38.5 million, with higher imports and domestic use cancelling out lower rough rice exports. That increase for old crop ending stocks translates to higher new crop beginning stocks, which was the only change for the new crop rice estimate, not at 34.2 million hundredweight.

The average 2021/22 farm price for rice in the U.S. is estimated at $15.90 per hundredweight, up $.20 on the month, with 2022/23 at $17.80, unchanged.

All in all, rising wheat prices, and the generally higher costs of farming, would make rice futures and broader rice and other grains’ ETF RJA worth monitoring next. The Chicago Mercantile Exchange (CME) offers a futures contract on rough rice that settles into 2,000 hundredweights, or about 91 metric tons of rough rice.